Introduced By _______________________________________________________________________________

A Bill for an Act entitled: "An Act creating a universal service fund for telecommunications services; authorizing the public
service commission to develop and implement the fund; providing for the telecommunications services supported by the
fund and operation of the fund through a contribution from telecommunications carriers; providing that the fund may be
administered by a private contracted entity under the direction of the public service commission; providing for distributions
from the fund to eligible telecommunications carriers; and providing an immediate effective date."

STATEMENT OF INTENT

A statement of intent is required for [this act] because it delegates rulemaking authority to the public service commission.
The legislature finds that universally available telecommunications services are essential to the health, welfare, and
economic well-being of the citizens of Montana. In order to preserve and advance the goal of universal service during the
transition to a fully competitive telecommunications market, the legislature finds that a Montana universal service fund
should be created. The fund must be consistent with federal laws and regulations. The Montana universal service fund
may not be duplicative of the federal fund but must provide the additional funding necessary to provide universal service in
Montana. The Montana universal service fund must be competitively and technologically neutral in both funding and
distribution. The Montana universal service fund must provide a predictable and sufficient mechanism of support and must
provide for the portability of funds to all eligible telecommunications carriers.

Be it enacted by the Legislature of the State of Montana:

NEW SECTION.Section 1. Definitions. (1) As used in [sections 1 through 4], the following definitions apply:

(a) "Commission" means the public service commission provided for in 2-15-2602.

(b) "Fund" means the universal service fund provided for in [section 3].

(c) "Incumbent telecommunications carrier" means a telecommunications carrier that on February 8, 1996, provided
telephone exchange service in Montana and was considered to be a member of the exchange carrier association pursuant to
47 CFR 69.601(b) or is a person or entity that on or after February 8, 1996, became a successor or assignee of the member.

(d) "Telecommunications" means the transmission, between or among points specified by the user, of information of the
user's choosing without change in the content of the information sent and received.

(ii) The term does not mean aggregators of telecommunications services as defined in 47 U.S.C. 226.

(f) "Telecommunications services" means the offering of telecommunications for a fee directly to the public or to classes
of users as to be effectively available directly to the public, regardless of the facilities used.

(2) Interpretation of the terms "telecommunications" and "telecommunications services" must be applied consistently with
the interpretation of those terms by the federal communications commission.

NEW SECTION.Section 2. Implementation. By June 1, 1997, the commission shall initiate rulemaking proceedings for
the establishment of a Montana universal service fund. The fund must be consistent with the federal universal service
policies of the federal Telecommunications Act of 1996, 47 U.S.C. 151, et seq., and with regulations adopted by the federal
communications commission concerning universal service funding. The implementation of the universal service fund must
commence by January 1, 1998.

NEW SECTION.Section 3. Universal service fund -- requirements. The commission shall establish the fund as
follows:

(1) The fund must be competitively and technologically neutral in all respects. The fund may not provide a competitive
advantage to or impose a competitive disadvantage on any telecommunications carrier operating in the state.

(2) The fund must preserve and advance universal service in the state by ensuring that residential customers have access to
single line basic local exchange service that is capable of providing the function of universal service established by the
federal communications commission to implement 47 U.S.C. 254(b) and (c). The commission may consider expansion of
the fund to include additional customer classes and services if the same classes and services are included in the federal
universal service fund.

(3) The Montana universal service fund may not duplicate the functions or targeted cost recovery of the federal universal
service fund. The Montana fund must provide a mechanism for specific, predictable, and sufficient revenue to complement
the revenue provided under the federal universal service fund as needed to maintain the universal availability of local
exchange service as provided in this section.

(4) The fund must provide revenue to support just, reasonable, and affordable local exchange service as provided in this
section. The amount of support must be the difference between the incumbent telecommunications carrier's highest local
exchange service rate available in a particular zone for the customer classes determined pursuant to subsection (2) and the
cost of local exchange service as defined by the federal communications commission in establishing the federal fund.

(5) The fund must provide for the portability of money between and among the eligible telecommunications carriers. The
eligibility requirements for a telecommunications carrier to receive money must be consistent with 47 U.S.C. 214(e) and
254(e) and applicable federal communications commission regulations.

(6) Every telecommunications carrier that offers intrastate telecommunications services shall contribute to the fund on an
equitable and nondiscriminatory basis. The commission may require all intrastate telecommunications carriers, regardless
of regulatory status for other purposes, to contribute to the fund. The commission may determine the method of
contribution, which must include a surcharge on all end user retail bills for intrastate telecommunications services.

(7) The commission shall designate an administrator to collect and distribute money and to operate the universal service
fund. The collections and distributions must be consistent with commission rules and federal law.

NEW SECTION.Section 4. Elimination of cross subsidies. The commission shall, upon implementation of the fund,
eliminate all implicit subsidies for local exchange access service, including the carrier common line charge on exchange
access services. The commission shall establish cost-based exchange access service rates. The commission may not
require or allow subsidization from any source other than the fund for the purpose of reducing the rate for any local
exchange service, including residential service.

NEW SECTION.Section 5. Low income assistance program. [Sections 1 through 5] may not be implemented in a
manner that interferes with or alters the telephone low income assistance program provided for in chapter 3, part 10.

NEW SECTION.Section 6. Codification instruction. [Sections 1 through 5] are intended to be codified as an integral
part of Title 69, chapter 3, and the provisions of Title 69, chapter 3, apply to [sections 1 through 5].

NEW SECTION.Section 7. Effective date. [This act] is effective on passage and approval.